Sales
Setting Attainable Goals for Product Market Fit
Refine your target market and set goals that work. This blog breaks down TAM, SAM, and SOM to ensure success.
Refine your target market and set goals that work. This blog breaks down TAM, SAM, and SOM to ensure success.
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It’s easy to get caught up in the excitement of a product’s potential and forget to set realistic expectations. Many businesses fall into this trap, aiming too high or too broadly, only to face frustration when results don’t match their aspirations.
The solution lies in narrowing your focus and setting achievable goals. Breaking down your target market into manageable segments helps focus your efforts, allocate resources effectively, and ensure everyone on your team is aligned with realistic objectives.
Let’s walk through the steps to set attainable goals that drive results. Ultimately, you’ll understand how to refine your approach from broad market potential to specific, actionable targets.
Unrealistic goals based on inflated expectations often lead to wasted time, missed opportunities, and team burnout.
Imagine a small business launching a new product and aiming to capture 50% of a global market within a year. Without the resources or reach to support such a bold claim, the team quickly becomes overwhelmed and discouraged, leading to poor execution and unmet targets.
In contrast, achievable goals rooted in data and market understanding create a foundation for success. Here’s why you should set realistic goals:
70% of large-scale business transformations fail, often due to unrealistic expectations and poor goal-setting.
When goals are too ambitious, they can set the stage for disappointment for your team and investors, customers, and other stakeholders. Unrealistic targets can erode trust when you fail to deliver on your promises.
Realistic goals clearly show success and help you avoid overstretching your capabilities. For example, instead of aiming to dominate a market overnight, you could target a specific customer segment with a competitive advantage.
This way, your progress feels steady and achievable, which keeps morale high and stakeholders satisfied.
Teams work better together when everyone understands the goal and believes it’s within reach. Misaligned expectations can lead to confusion, wasted effort, and friction between departments.
Highly engaged teams are 21% more productive and 22% more profitable than those without clear objectives.
You need alignment because having attainable goals gives your team a shared sense of purpose. It’s like rowing a boat—if everyone’s paddling in the same direction, you’ll move faster and more smoothly.
For instance, if your sales team knows the SOM (Serviceable Obtainable Market) is a local small business, they can focus on leads that match that profile instead of chasing less relevant opportunities.
One of the biggest risks of aiming too broadly is spreading your resources too thin. This can result in lackluster performance across the board. Instead, concentrating your efforts on winnable markets allows you to maximize your impact.
Targeting a smaller, attainable segment lets you make meaningful progress. A startup offering a niche SaaS solution could prioritize early adopters within a specific industry rather than trying to appeal to everyone at once.
This approach improves your odds of success and helps you learn and adapt as you go.
Achieving product-market fit means you’ve found a market segment that needs your product and is willing to pay for it, and you can serve it effectively. Even the best products can fail to gain traction without product-market fit because they’re not aligned with market demand.
But how do you reach this elusive milestone? It starts with understanding your target market and narrowing your focus.
Broad markets may look appealing, but the way to success is refining your approach to concentrate on the most relevant and reachable customers. Here’s how to do it:
Your TAM is the foundation of understanding your market. It represents the total demand for your product or service if there are no limitations—no competition, no geographic barriers, and no resource constraints.
Think of it as the biggest pie your business could hope to take a slice from. If you’re launching a project management tool, your TAM might be used by every business worldwide or could benefit from such software.
This big-picture number helps you understand the scale of opportunity. While TAM is exciting, it’s important to remember that it’s purely theoretical. No company can capture the entire TAM, and that’s okay—it’s a starting point, not the end goal.
Calculating TAM often involves using industry reports, market research, or publicly available data. You might calculate it by multiplying the total number of potential customers by your industry's average revenue per customer.
Once you know the TAM, you can start narrowing down to more practical opportunities.
SAM is where realism starts to enter the picture. Given your operational and logistical capabilities, it’s a more refined portion of your TAM that focuses on the customers you can realistically serve.
This data considers constraints like geographic reach, language requirements, and available infrastructure.
For instance, if your project management tool targets businesses with specific technological infrastructure, your SAM might be businesses in your country or region that meet those criteria. Unlike TAM, SAM factors the practicalities of what your company can do today.
Defining your SAM also helps you avoid overextending yourself. Instead of reaching every potential customer globally, you can focus on a manageable group where your resources and services are most relevant.
This clarity makes your marketing and sales strategies more focused and effective.
SOM is where strategy meets execution. It’s the smallest, most actionable segment of your SAM—the customers you can realistically capture based on your current resources, competition, and market reach.
This benchmark is what you aim to achieve in the short term, making it significant for success. For your project management tool, your SOM could be small to medium-sized businesses in your region actively looking for an alternative to their current software.
These businesses might align closely with your value proposition and can be reached through your existing marketing and sales efforts.
To define your SOM, consider your competitive positioning, your marketing and sales capabilities, and the specific needs of your target segment.
Identifying early adopters within your SOM is also helpful. Customers are eager to try new solutions and can provide valuable feedback to improve your product.
Suppose you’re launching a project management tool for small to medium-sized businesses (SMBs). Breaking down the market using these three steps can help refine your focus and set realistic, actionable goals.
TAM represents the maximum possible demand for your product without constraints. For your project management tool, TAM could include every business worldwide that might need project management software.
To calculate TAM, start with the total number of potential customers in your category.
For instance:
Based on these figures, the TAM for your product could be estimated as follows:
TAM = 40 million businesses × $1,200 = $48 billion.
While TAM is exciting, it’s important to remember that it’s a hypothetical number. You’ll unlikely capture this entire market, but TAM is a valuable benchmark for understanding the scale of opportunity.
SAM narrows the focus to the portion of the TAM that aligns with your business’s current capabilities. For instance, you might not have the resources to serve businesses in every country.
If your project management tool is optimized for English-speaking users and hosted in a specific region, you’d focus on businesses in those areas.
Let’s refine our calculation:
Now, SAM can be estimated as:
SAM = 4 million businesses × $1,200 = $4.8 billion.
You identify a realistic and manageable segment of the broader market. This helps you align your resources, such as marketing and sales efforts, with where you will most likely make an impact.
SOM is the most refined and actionable segment of your SAM. It focuses on the customers you can realistically capture in the short term, considering your resources, competition, and marketing reach.
If your company is just starting, you might target SMBs actively looking for a more straightforward, affordable project management tool within your region.
Let’s break it down further:
This brings your SOM to:
SOM = 400,000 businesses × 5% × $1,200 = $24 million.
You now have a concrete, short-term target to aim for. It’s achievable, measurable, and gives your team a clear focus.
Setting attainable goals isn’t just a strategic exercise—it’s the cornerstone of sustainable growth. Dividing your market into TAM, SAM, and SOM can focus your efforts where they’ll have the most significant impact.
Success often starts with small, manageable wins. As you capture your SOM, you’ll gain valuable insights and momentum to expand your reach.
Stay realistic, flexible, and data-driven. Markets change, and so will your opportunities. Keep revisiting your goals as you grow, and never underestimate the power of a focused approach. You’re not just chasing numbers—you’re building a strong foundation for long-term success.
Want to take your market strategy skills to the next level? Explore more expert guides, actionable tips, and in-depth resources at Lunas’ Library. From mastering market research to refining your sales strategies, Lunas’ Library has everything you need to grow confidently.
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